This report describes the current innovation ecosystem and the challenges it faces, and it discusses the efforts made by the government towards the promotion of innovation for entrepreneurship development and sustainable growth.

1. INNOVATION AND ENTREPRENEURSHIP FOR SUSTAINABLE GROWTH
GOVERNMENT OF INDIA
BY: - HARSHITA BANSAL
Abstract
This article describes the current innovation ecosystem and the challenges it faces, and it
discusses the efforts made by the government towards the promotion of innovation for
entrepreneurship development and sustainable growth.
Introduction
India is a country with over 1.2 billion people, 379 million (31%) of which are between the ages
of 18 and 35 (Census of India, 2011). And, many of these young people are in search of jobs,
despite being educated. For example, only one in every four urban males under 29 years is
employed even though they hold at least a certificate or diploma. The aim of the government
has been to create employment opportunities for youth while focusing on rapid economic
growth. Entrepreneurship development is one of the mechanisms adopted by the Government
of India towards the creation of job opportunities. The government's assumption is that
support for innovation will enhance entrepreneurship development, which will in turn
accelerate economic growth.
The Indian Context
The roots of India's current economic systems extend back to the time of colonial rule and its
autocratic and fragmented structure. The country was made to forcefully serve as a market to
its colonial bosses and their industrial products. Independence in 1947 brought many changes,
but the country did not have to start "from scratch". The foundations of the today's legal,
financial, educational, bureaucratic governance systems were inherited from the colonial
period. Even the roots of publicly funded research structures, which have grown large today,
date back to the colonial days. However, one key area of change following independence
involved the adoption of a closed economy that relied heavily on central planning, restricted
imports, and nationalization of industries. Not until 1991 did India open its economy, which led
to real competitiveness and a need for innovation in all industries.

2. India's national innovation system
The current national innovation systemin India is a vast and complex system comprised of
knowledge producers such as science and technology institutions, academia, and innovating
individuals and knowledge users (e.g., industry-production/services in the public and private
sectors). Various governments in India have given priority to science, technology, and
innovation, and therefore India has evolved a large publicly funded R&D structure. There are
various councils and research structures under various ministries, which cater to different
research areas and which are distributed around the country. Examples include:
 Council of Scientific and Industrial Research (CSIR): established in 1941; 39 laboratories
 Indian Council of Agricultural Research (ICAR): established in 1929; 99 institutes and 17
research centres
 Indian Council of Medical Research (ICMR): established in 1911; 30 laboratories
 Defence Research & Development Organisation (DRDO): established in 1958; 48
laboratories
There are many other publicly funded institutions that perform research and technology
development for There are also more than 1200 privately or state-funded SIROs. In academia,
there are 280 universities in the public sector, including institutions of high education such as
IITs and the IISc, in addition to more than 150 self-financing and deemed universities. There are
also more than 2500 in-house R&D centres created by corporations, and there are NGOs that
use and apply the available knowledge for the benefit of the society.
India's innovation ecosystem
Broadly speaking, an innovation ecosystem is a combination of two distinct but largely
separated economies:
i) the knowledge economy, which is driven by fundamental research, and
ii) the commercial, which is driven by the marketplace (Jackson, 2013).
In India, the innovation ecosystem includes the entire national innovation system described in
the previous section, plus individual innovators and entrepreneurs; mentors; government
policies; angel, venture capital, institutional, and industrial funding mechanisms, intellectual
property rights mechanisms; technology transfer mechanisms; market inputs; and incentives,
awards, and other innovation-recognition mechanisms, among others. Ideally, these various
structures and mechanisms facilitate the smooth translation of innovations through the various
segments of a complex innovation chain that takes ideas from "mind to market".
"India's GERD was 0.76% in 2007, essentially unchanged since 2000... India's innovation system
is dominated by universities and PRIs... Government R&D expenditures accounted for 0.47% of

3. GDP; Some 73% of public research is funded by block grants which are allocated on the basis of
national research priorities... 95% of business research and development activities are funded by
firms themselves, public financial support is negligible."
Together, these indicators suggest that, in spite of a large national innovation system, the
current performance of the Indian innovation ecosystemappears weak. One may speculate
that the reasons for this poor performance may be related to fragmentation and a lack of focus:
the legacies and mindsets of the pre-economic liberalization era are still being carried forward
by some of its constituent stakeholders. At least, this speculation finds support in the
government's attempts to address many of these challenges in its recent policy on innovation.
The policy initiatives undertaken by the Government of India to improve the innovation
ecosystem are described below; but first, the following section presents the author's view of
the current challenges facing India's innovation ecosystem.
Current Challenges
The key challenges faced by India's innovation ecosystem and entrepreneurship in general are
listed and described below:
1. Fragmented policy and policy implementation: There has been no comprehensive policy
focusing on innovation and entrepreneurship so far. Also, the mechanisms to operate
existing, fragmented policies were not uniform, which resulted in gaps in understanding
and failure to achieve the desired effects of such policies.
2. Inadequate funding of R&D: Little national funding is available for R&D: from 2011 to
2012 it was only 0.88% of gross domestic product (NSTMIS, 2013). Consequentially,
even less funding is available to the academic and R&D institutions.
3. Difficult and lengthy funding procedures: Although funding is available from banks and
public sources the procedures for accessing such funding are often complex, and lengthy
in other words, not conducive to innovation and entrepreneurship.
4. Weak linkages between stakeholders: The linkages between industry, especially medium
and small-scale enterprises and R&D or academic institutions are weak. Industry
requires proven technologies, but the institutions can only offer technologies at
considerably earlier stages, meaning there is still much work to be done to bring the
technologies to market.
5. Non-conducive education system: The general education system is still too focused on
grades and careers and is not oriented toward innovation and entrepreneurship. This

4. situation is further worsened by the inherent problems of lack of infrastructure and
good facilities in the educational institutions; delays in the funding system.
6. Poor infrastructure facilities in villages: Basic infrastructure facilities such as electricity,
Internet, roads and rail, and even the availability of a skilled workforce, are not evenly
distributed in India and often weak in smaller cities or towns and rural parts of the
country.
7. Risk aversion among entrepreneurs: Indian entrepreneurs often seek established
technology as a basis for starting their business; they are hesitant to take on innovative
ideas because of the risks involved, including the low availability and high cost of funds
that often arrive too late.
8. Inadequate protection of intellectual property rights: In India, the intellectual property
regime is weak. For most entrepreneurs, patents and other forms of protection take too
long and cost too much.
New Policy Initiatives
As mentioned earlier, the Government of India declared 2010-2020 as the "Decade of
Innovation", for which the roadmap would be prepared by the newly established National
Innovation Council. The National Innovation Council is "the first step in creating a crosscutting
system which will provide mutually reinforcing policies, recommendations and methodologies
to implement and boost innovation performance in the country. The Science, Technology and
Innovation Policy outlines the major policy initiatives to strengthen the innovation ecosystem
and give a boost to the development of innovation-led entrepreneurship in India:
"The guiding vision of aspiring Indian STI [Science, Technology, and Innovation] enterprise is to
accelerate the pace of discovery and delivery of science-led solutions for faster, sustainable and
inclusive growth. A strong and viable Science, Research and Innovation System for High
Technology-led path for India (SRISHTI) is the goal of the new STI policy."
Below, the key initiatives of this policy are explored in light of the challenges identified in the
previous section:
1. Funding: The policy announces an increase in the gross expenditure in research and
development from less than 1% to 2% of the gross domestic product over the next five
years. It also states that a National Science, Technology and Innovation Foundation will
be established "as a public-private partnership initiative for investing critical levels of
resources in innovative and ambitious projects", thus attracting private sector
investments in R&D. It further announces the establishment of a fund for innovations
for social inclusion, "small idea-small money", and a "risky idea fund".

5. 2. Strengthening the linkages between stakeholders: The policy calls for "special and
innovative mechanisms for fostering academia–research–industry partnerships" and
facilitating the "mobility of experts from academia to industry and vice versa".
3. Promotion of science: The policy promotes the spread of scientific interest and
understanding across all sections of society. The policy will "further enable school
science education reforms by improving teaching methods, science curricula, motivating
science teachers and schemes for early attraction of talent to science".
4. Risk taking ability: The policy accepts risk as an integral part of a vibrant innovation
system. The policy emphasizes risk sharing by the government, which is slated to
"significantly increase private sector investment in R&D and technology development"
and "new financing mechanisms would be created for investing in enterprises without
fear of failure".
5. Intellectual property: The policy will seek to "establish a new regulatory framework for
data access and sharing creation and sharing of intellectual property. The new policy
framework will enable strategic partnerships and alliances with other nations through
both bilateral and multilateral cooperation in science, technology and innovation.
6. Addressing the innovation value chain: The policy also enables a holistic approach to the
complex value chain of innovation by providing science and technology interventions at
all levels of research, technology and manufacturing, and services in the areas of
socioeconomic importance. In this way, the policy has a very positive note and
expresses a desire to shape the future of India. With the advantages of a "large
demographic dividend" and a "huge young talent pool", the policy foresees the
achievement of national goals for sustainable and inclusive growth.
7. Participation in global R&D infrastructure: The policy proposes the creation of "high-cost
global infrastructure in some fields through international consortia models. Indian
participation in such international projects will be encouraged and facilitated to gain
access to facilities for advanced research in cutting edge areas of science. This will also
enable the Indian industry to gain global experience and competitiveness in some high-
technology areas with spin-off benefits".
The Science, Technology and Innovation Policy thus tries to join the fragmented pieces of the
Indian innovation ecosystemand bring it into the sharper focus. It addresses the need to
enhance scientific understanding and skills among the young and aspires to position India
among the top five global scientific powers by 2020.

6. Conclusion
The government has realized the roots of the basic problems and made appropriate reforms,
mainly in the areas of administration, economy, and labour, as it tries to free itself from
negative aspects of its colonial legacy. The investments in science, technology, and innovation
are not yet translating into the desired reality. Realizing that the innovation-led
entrepreneurship development holds promise for growth, the government has taken major
policy initiatives with a strong innovation agenda.
The main initiatives are provision of funds and removing the sluggishness in the ecosystem for
innovations by improving linkages and making it vibrant in a comprehensive way. The policy is
in place; now, its success depends on its implementation. Sometime will needed before
conclusions can be drawn about the policy's ultimate effects on the growth path. However, the
new direction reflects strong growth aspirations and resonates with the zeal and zest of the
youth who wish to journey on the risky path of innovation-based entrepreneurship.